Group Decisions Under Ambiguity: Convergence to Neutrality

Abstract:     
This paper focuses on decisions under ambiguity. Participants in a laboratory experiment made decisions in three different settings: (a) individually, (b) individually after discussing the decisions with others, and (c) in groups of three. We show that groups are more likely to make ambiguity-neutral decisions than individuals, and that individuals make more ambiguity-neutral decisions after discussing the decisions with others. This shift towards higher ambiguity neutrality in groups and after a group discussion is associated with a reduction in the rates of both ambiguity aversion and ambiguity seeking. We attribute the results to the effective and persuasive communication that takes place in groups.

Number of Pages in PDF File: 38

Keywords: ambiguity, group decision making, imprecision, risk, vagueness

JEL Classification: C92, D71, D81

working papers series